You know the story. Here’s our ‘XYZ” fund. It’s performing great. Everyone is buying it.
It’s a story about why you are not buying it. If everyone else is buying, are you not afraid of missing out? Its FOMO.
Why do investment firms promote best-selling funds? Most investors don’t do due diligence on funds. Why? It’s like lifting up the bonnet on your car… all you see is just a pile of metal and plastic. How are you supposed to know what the engine should look like? Instead, if everyone else is buying it, they can’t all be wrong, can they? So consensus or popularity solves the due diligence question. It’s a lazy way to buy (or sell).
I certainly can’t expect all investors to be thorough in their investigations before they invest, but rather than using a funds popularity, there is another way to make good investment decisions?
Simply ask us.